CHAPTER TWO Notes Essay

Submitted By kjb76
Words: 1041
Pages: 5

I. Introduction
A. The best strategy for any firm is ultimately a unique (different) construction reflecting (fitting with) that firm's particular circumstances.
B. So, one must match (fit) a firm's strategy with its internal (internal fit) and external (external fit)conditions.
C. Corporate Strategy* = what industry(ies) should we compete in and not compete in?
1. Business Strategy* = how should we compete in a given industry? (Note - this should be a follow-up question after answering the prior line)
D. Elements of Industry Structure including the determinants of:
The many determinants of the power of
1. customer power
2. supplier power
3. competitor power
a. barriers to entry for new entrants
b. threats of substitution
c. rivalry every business uses porter’s five forces at every part of analysis.
E. Considerations When Assessing A Firm's industry and competitive environment External Environment Include:
1. potential for market growth (or shrinkage)
2. profit margins
3. the scope of competitive rivalry
4. demand and supply conditions
5. how and to what degree, if any, is the market segmented
6. what is the pace of technological change
F. What Are Some of the Issues that an External Analysis Should Show Us?
1. the attractiveness (or lack thereof) of industry profitability
2. key success factors (KSF's)-
3. what are the competitive forces
4. how intense is the competition
5. what are the driving forces- what should I be paying attention to. Driving forces in our industry.
6. are there any barriers to entry, and if so, what are they
a. economies of scale and scope
b. product differentiation
c. capital requirements
d. access to channels of distribution
e. government policy and regulations
f. cost disadvantages independent of scale
i. know how ii. learning experience iii. process management what fits and what doesn’t, how to make things fit. Etc.
SWOT analysis- strengths weaknesses opportunities and threats. OT external environment. Want the report to tell what opportunities and threats are in this environment.
II. Models That Are Used to Help Analyze a Firm's Environment
1. SWOT analysis
2. Porter's Five Forces
3. PESTLE Models (please see prior notes on these topics)
Political Analysis
Economic Analysis
Social Analysis
Technology
Legal environment
E
4. Structure - Conduct - Performance (S-C-P) Model
1. Structure = industry structure, so look at such factors as:
a. the competitors - the number of them, their strengths/weaknesses, etc.
b. the products - homogenous/heterogeneous, etc.
c. the cost of entry and exit (notice ties to Porter's Model)
2. Conduct = the strategies that are implemented by firms in the industry
3. Performance =
d. Linkage - note how these factors influence one another, particularly how industry structure sets the range of available options (conduct) and constraints of firms and performances - so structure surely impacts the other two elements of this model
d. Linkage - note how these factors influence one another, particularly how industry structure sets the range of available options (conduct) and constraints of firms and performances - so structure surely impacts the other two elements of this model

III. Examples of Industry Structure and the Resulting Strategies, etc.
A. Emerging Industries = early, formative stage industries like wireless Internet communication, HDTV, online education, and electronic banking)
1. Two Critical Issues
a. how do we finance initial operations until sales and revenues take off? - and -
b. what market segments and competitive advantages should be chosen or are available?
2. Strategic Avenues Often Taken By Firms In Such An Industry:
a. win the early race for industry leadership
i. be risk-taking, bold and creative; ii. differentiation strategies work best;
b. perfect our technology, quality & performance features;
c. once a dominant technology surfaces, adopt it quickly
d. form strategic alliances with key suppliers;
e. acquire or ally with companies with related or